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Consolidated Balance Sheet: Editing Time Is Different Due to Different Rules

Published: 09/05/17

Frequently the European headquarters that own directly a company based in Italy asked “why the balance sheet is not ready?”.

The question is made in order to prepare the consolidated balance sheet that obviously include all the balance sheet of the various companies owned by the controlling company.

Until the tax rules are so different from a county to another and these rules aren’t coordinated with the balance sheet standards the answer will be obvoiusly negative.

Just consider the issues related the invoice to be received, for Italian tax rules the balance sheet must consider all the events aim of the year certified by the balance sheet, or the taxes to be paid in relation to that year even if financially paid in the subsequent year; so, if a company prepare the taxes in January to fulfill the balance sheet probably doesn’t know all the invoices to be received in Fabruary or March, related to the previous year, and this creates a confusion between tax assessment and real taxes due by the company.

The tax difference, due to the necessity to close the balance sheet, can’t be deducted by the company in another period, that’s why frequently Italian companies asked more and more time than others to close the balance sheet.

Related to above, consider also the issues for the auditors that must certify a balance sheet without all the information needed to give a knowledge evaluation; the lack of information can, in any cases, give a difference that is not relevant to guarantee a right vision of the company but, in other cases, can twisted the reality, an example can be the insolvency or bankruptcy of a client declared in December but come to light only in February.

Until the tax authority will start to consider the events relevant in the year when they come to light and not in the year of the declaration, passing from the economic representation of the facts to a financial representation, the issues to close a balance sheet according with the request of the european headquarter will remain, with all the relevant problems for headquarters to close the consolidated balance sheet or, on the opposite side, for the Italian based company to fulfill correctly taxes in their balance sheet including datas unknown at the right time.

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Federico Rossi has been focused on tax and administrative matters mainly about commercial companies, automotive, real estate and metal processing clients, Mr. Rossi has also focused in individual repatriation fiscal benefit.
Other practice included m&a, tax planning, corprorate formation and tax compliance.